We maintain an OVERWEIGHT rating on the Property sector, underpinned by robust industrial activities driven by global supply chain shifts, rising data centre investment and positive residential property momentum. Favouring sustainability, we like stocks with a recurring income theme. Our top BUY pick is Sime Property, given its focus on generating recurring income through industrial park and data centre deals. Similarly, we have a BUY on Mah Sing due to its data centre ventures and improving prospects for its glove operations. We maintain BUY on SP Setia due to its undemanding valuations. Lastly, we upgrade UEMS to a BUY (from Hold), as we expect positive news flow on the Johor-Singapore Special Economic Zone will drive interest in the stock.

• Demand for industrial properties driven by global supply chain shifts and rising data centre investment. We believe the industrial property segment will continue to be driven by the two key themes in 2025 namely, global supply chain shifts amid rising tension between the US-China and rising data centre investment in Malaysia.
• Theme 1: Beneficiary of global supply chain shifts. The rising trade tension between the US-China which has led to global supply chain shifts, positioning Malaysia as a strategic hub, attracting increasing levels of Foreign Direct Investment (FDI) from global companies such as Intel Corp, Texas Instruments, Infineon Technologies, Lam Research and Geely. Approved FDI picked up in 2023 vs 2022 with the highest approvals for electrical and electronic (E&E) products, machinery manufacturing and chemical sectors. Approved FDI in 1HCY24 has grown by 16.7% YoY to RM74.5 bil from RM63.8 bil a year ago. The influx of FDI will spur the demand for industrial properties. We are seeing property companies starting to build industrial parks to cater to the strong demand for industrial properties.
• Theme 2: Rising data centre investment. Malaysia has seen huge approved digital investments of RM141 bil for first ten months of 2024 on top of the total approved investments from data centres amounted to RM114.7 bil from 2021-2023. The total maximum demand installed as of end Sep 2024 stood at 1.7GW. In the long run, TNB sees potential maximum demand from data centre in excess of 5GW by 2035 which is in line with MITI's expectation that data centre projects to reach at least 4.7GW over the next 10 years in Malaysia. Currently, property companies with huge landbank will probably benefit from the rising data centre investment through selling landbank to data centre operators, entering into joint venture with data centre operators or leasing data centre to data centre operators or hyperscalers.
• Residential property market to maintain its momentum. Demand for residential property was robust in 1HCY24 with total number and value of residential property transactions rising by 6.1% and 10.4% YoY respectively, based on NAPIC data. We expect the momentum to continue due to favourable government policy to support the affordable housing segment, relaunching of Malaysia My Second Home (MM2H) programme and sustained positive labour market conditions.
• Maintain Overweight with preference on companies that focus on building recurring income which will provide long-term earnings visibility. Our top pick is Sime Property. Our other BUYs are Mah Sing, SP Setia and UEMS. While the sector is currently trading at the historical mean, we believe the sector valuation will be supported by landbank value crystallisation through disposal or building of recurring income base for industrial park and data centre as well as continued strong sales momentum in the residential property segment. Sector Report 24 Dec 2024 PROPERTY Strong Demand for Industrial Property. Maintain OW. OVERWEIGHTLiew Jin Sheng liew.jin-sheng@ambankgroup.com +603 2036 1687 (Maintained) Rationale for report: Sector Update

Source: AmInvest Research - 24 Dec 2024